OMAN - Finance
President, Central Bank of Oman (CBO)
Tahir Bin Salim Bin Abdullah Al Amri was appointed Executive President of CBO in 2017. He is an experienced treasury and finance professional with a successful track record in all aspects of treasury and finance functions. He serves as a board member of a number of private and public entities, from a leading local bank to sovereign wealth funds, and the oil and gas industry. He has played leading roles in negotiating financing agreements, writing articles of association, technical licensing and construction contracts, oil and gas upstream agreements, shareholder agreements, shipping contracts, establishing credit policies and procedures, and board audit committees.
The key consideration from CBO’s perspective in the recovery phase is to ensure resilience of the banking system such that it can support the credit requirements of various stakeholders. This would also require adequate liquidity in the system, robust and efficient payment and settlement, and credible support to the pegged exchange rate regime. In a currency peg regime, monetary policy cannot be pursued independently, and the policy rate and liquidity facilities are the key instruments to ensure its effectiveness. Several regulatory provisions can also be utilized to support growth in the recovery phase. The banks were given suitable regulatory forbearance so that businesses and individuals facing cash flow problems due to the pandemic had sufficient time for recovery. The central bank also ensured adequate liquidity for the banking system, as banks are adequately capitalized with the Basel capital adequacy ratio (CAR) at 18.5% as of March 2021, much higher than the mandated 12.25%. The capital conservation buffer, liquidity ratio, lending/financing ratio, risk classification of loans, banking services charges, foreign currency swap, and rediscount on Bills of Exchange/Promissory Notes are some of the instruments that CBO has used during the pandemic and will continue to utilize in the post-pandemic recovery phase. CBO is working on the Payment System Reforms and expects enhancement of the real-time gross settlement (RTGS) system toward operating on a 24/7 basis and interfacing with regional RTGS. We have also facilitated enhanced coverage of e-payment acceptance for micro business entities, and we expect the rollout Mandate Management & Direct Debits facilities in 2021. We are introducing enabling provisions for fintech in terms of facilitation and regulation, such that we will move in step with global developments within prudential norms.
The major contribution of the central bank lies in the achievement of one of the three pillars of Vision 2040—economy and development, geared at generating wealth through economic diversification and private sector partnership. An effective monetary policy framework along with a sound banking and financial system are the key factors to efficiently channel financial resources to productive sectors in the economy. Meanwhile, monetary policy will help achieve the objectives of Vision 2040 by supporting the currency peg regime and fostering a stable macroeconomic environment and financial stability, along with facilitating the credit requirements of different sectors of the economy. CBO is currently working on the action plan of the Monetary Policy Enhancement Project in order to enhance the effectiveness and transmission mechanism of CBO’s monetary policy. The focus areas of the project include liquidity forecasting and management framework, developing domestic money and forex markets, collateral framework, emergency liquidity assistance framework, and macroeconomic forecasting.
In terms of credit support to SMEs, 2020 saw healthy growth of 32.5%. The share of SME credit in overall credit improved from 2.8% at end-Dec 2019 to 3.6% at end-Dec 2020. CBO has directed all banks to accept requests for deferment of loan installments/interest/profits from all the affected borrowers, particularly SMEs, without adversely impacting the risk classification of such loans. Interest payments have been suspended temporarily. In addition, ODB has started granting interest-free emergency loans to small firms, which are most affected by the COVID-19 pandemic. In terms of financing SMEs, CBO has been at the forefront of promoting policies that facilitate this. CBO has directed all banks to allocate a minimum 5% of their total loans to SMEs and emphasized that banks should strive to do more on this front. Several financing programs through financial institutions, such as the Oman Credit and Financial Information Centre (Mala’a), have been developed and launched specifically for SMEs. In addition, CBO is formulating a strategy to support the growth and adoption of fintech services geared at supporting SMEs and establishing a competitive ecosystem for banks to develop new products and services.
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